The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

An Appeal Panel hearing was held on September 13, 2004, at the employer's request. The Panel discussed this appeal on the same day.

Issue

1. Whether or not R.C. is a deemed worker of the firm for 1998, 2000 and 2001 whose earnings must be reported to the WCB for assessment and claim purposes;

2. Whether or not O.S. is a deemed worker of the firm for 2002 whose earnings must be reported to the WCB for assessment and claim purposes;

3. Whether or not the firm must pay the WCB $1,919.04 in over-under interest charges;

4. Whether or not the firm must pay the WCB $3,767.62 in inadequate return penalties; and

5. Whether or not the firm must pay the WCB $3,143.61 in late payment penalties.

Decision

That R.C. is a deemed worker of the firm for 1998, 2000 and 2001 whose earnings must be reported to the WCB for assessment and claim purposes;

That O.S. is a deemed worker of the firm for 2002 whose earnings must be reported to the WCB for assessment and claim purposes;

That the firm must pay the WCB $1,919.04 in over-under interest charges;

That the firm must pay the WCB $3,767.62 in inadequate return penalties; and

That the firm must pay the WCB $3,143.61 in late payment penalties.

Decision: Unanimous

Background

Based on a Workers Compensation Board (WCB) audit which was conducted on January 22, 2003, it was determined that the appellant firm [the firm] under-reported workers' earnings between 1998 and 2002 inclusive. The audit adjustment amounted to $46,396.81, which included $7,600.00 for 2003. This decision was relayed to the firm by the WCB in a letter dated October 1, 2003.

In November 2003, the firm requested leniency on the penalties applied to its account and also disagreed with the WCB's decision that R.C. and O.S. were considered employees of its firm. Prior to considering the firm's appeal, the WCB obtained additional information concerning the working relationship between O.S. and the firm.

On March 16, 2004, the Assessment Committee rendered the following decisions with respect to the firm's appeal:

• That R.C. was a deemed worker of the firm for 1998, 2000 and 2001 and that the firm must report his earnings to the WCB for assessment and claim purposes.
  
  The Assessment Committee noted that general contractors in construction industries were required to report on behalf of any individuals not registered with the WCB as employers or labour contractors. R.C. was not registered with the WCB as an "employer" or "labour contractor" during the years in question. Thus, he was deemed to be a worker of the firm.

• That O.S. was a deemed worker of the firm for 2002 and that the firm must report his earnings to the WCB for assessment and claim purposes.
  
  The Assessment Committee noted that for work not covered under WCB Policy 35.10.50, the WCB used Section 2.02 of the Audit Procedure Manual to determine whether an individual's earnings are assessable under the Act. It applied section 2.02 and determined that O.S. was deemed a worker of the firm.

• The Assessment Committee also considered the inadequate return penalty and late payment penalty and determined that the firm was required to pay certain charges and penalties.

In May 2004, the firm appealed five of the Assessment Committee's decisions and an oral hearing was arranged.

Reasons

Although there were five issues before us, the main issues (no. 1 & 2) related to whether certain individuals who provided services to the firm should be deemed as workers of the firm. The remaining issues (No. 3 to 5) are directly related to the main issues and are determined by the decisions on the main issues. The firm acknowledged this and did not make a submission on issues No. 3 to 5.

For the firm's appeal to be successful, we would have to find that R.C. and O.S. should not be deemed as workers of the firm. We are not able to make this determination. We find that R.C. and O.S. were correctly deemed to be workers of the firm for the respective periods and their earnings should have been reported to the WCB for assessment and claim purposes.

Applicable Legislation and Policy

Section 60(2.1) of The Worker's Compensation Act is applicable to this case. It provides as follows:

60(2.1) - Deemed worker and employer

Notwithstanding the other provisions of this Act, where a person who is not a worker under this Part performs work for the benefit of another person, the board may deem the first person to be a worker, and the second person to be the employer of the first person, within the meaning of this Act; and the board may determine an amount that shall be deemed to be the earnings of the first person, for the purpose of this Part.

WCB Policy 35.10.50 is also applicable. Sections 1 of this policy provides as follows:

Deemed Workers and Deemed Employers

1. If a person performing work or services in a compulsory industry is not an employer, an independent contractor with personal coverage or a labour contractor with personal coverage, then the person, and any workers hired by the person, are for the purposes of the Act, deemed to be workers in the employ of the principal for whom the work was performed, and the principal is deemed to be the employer of those persons.

As well Section 3 of the policy provides that the principal will be responsible for payment of assessments based on the assessable earnings of the worker.

The WCB has also established guidelines for determining whether persons who are not included in Board Policy 35.10.50 are considered workers. These guidelines are set out in the section 2.02 of the WCB's Audit Procedure Manual.

Other provisions of the Act, regulations and Board policy are relevant with respect to issues No. 3 to 5 dealing with the assessment of penalties and charges but we have not referred to them in this decision.

Employer's Position

The firm was represented at the hearing by its president who made a presentation in support of the appeal. The president outlined the work and contractual relationships between the firm and the deemed workers. He noted that both were considered as independent contractors for the purpose of taxation and employment insurance, were able to work for other firms and set their own hours. He also noted that similar arrangements between other firms and independent contractors were common in this industry. He expressed concern that his firm was being treated differently than others in the industry and noted the need for a level playing field.

Panel's Decision with respect to R.C.

The evidence before us confirmed that R.C. performed construction work for the firm in 1998, 2000 and 2001. The firm's president provided us with information to demonstrate that R.C. was a sub-contractor and was able to work for other firms, used his own vehicle and tools, scheduled his own work and was treated by tax and employment insurance entities as self-employed. However the evidence also established that during the noted years, R.C. did not have WCB coverage as an independent contractor, employer or labour contractor. Under Board policy 35.10.50, R.C. is deemed to be a worker in the employ of the firm (the principal) and the firm is responsible for paying assessment on R.C.'s earnings. We find Board Policy 35.10.50 is applicable and that R.C. is properly deemed to be a worker of the firm.

Panel Decision with respect to O.S.

O.S. was a commission salesperson/ designer who provided services to the firm. Unlike R.C.'s services, the services provided by O.S. are not covered by Board Policy 35.10.50. It is therefore necessary to consider O.S.'s relationship to the firm in light of the guidelines set out in the WCB's Audit Procedure Manual. In this case, the WCB applied the guidelines and determined that O.S. was a deemed worker of the firm in 2002.

We have reviewed the file and note that O.S. used his own vehicle, worked from home, could provide services to other firms which were not competing with the firm, was treated by tax and employment insurance entities as self-employed, scheduled his work and was only paid on completed sales. However we also note that O.S. was paid in regular intervals, was paid regardless of whether the employer was paid, did not advertise his services or otherwise operate as a business enterprise and performed a function, in design and sales which was an integral part of the firm's business.

We have applied the guidelines and find that it is appropriate to deem O.S. as a worker of the firm for the year 2002 and to assess the firm on his earnings. We attach particular weight to the following facts:

• O.S. was paid in regular intervals.
  
  
• O.S. did not operate as a business enterprise, for example; he did not advertise his services.
  
  
• O.S. was paid regardless of whether the firm collected payment and did not suffer losses.
  
  
• O.S.'s function in design and sale of the firm's products was integral to the firm's business.
  
  
• O.S. was prohibited by contract from providing services to any of the employer's competitors.

Given the above determinations, the firm's appeal on all issues is denied.

Panel Members

A. Scramstad, Presiding Officer
A. Finkel, Commissioner
M. Day, Commissioner

Recording Secretary, B. Miller

A. Scramstad - Presiding Officer
(on behalf of the panel)

Signed at Winnipeg this 24th day of September, 2004